Is Frozen Pizza Going the Way of the Typewriter? Category Review and Recommendations for Frozen Pizza March 2013

Global Customer Insights & Analytics 1 Is Frozen Pizza Going the Way of the Typewriter? Health concerns work against pizza –Health: Pizza is #2 source of saturated fat due to cheese, no credit as protein source, sodium, fat, processed food –Healthy means fresh, smaller portions, large pizzas do not work for small households Multicultural America – ethnic foods sales are up, new flavors desired, shoppers want customization Consumer redefining value to mean more than price –It will take quality and value to compete with Takeout More people snacking, but pizza is not portable nor easy to prepare as are microwavable or toaster snacks

Global Customer Insights & Analytics 2 Purpose: To Activate Shopper Insights to Drive Frozen Pizza Category Results A standard approach to answer the following questions Key Questions AnsweredSupportive Analyses 1. What is the Category? Consumer Decision Tree or Hierarchy 2. How am I doing with the Category? Dollar and Unit Sales Trends All Shopper Scorecard Walmart Shopper Cross-Purchase Scorecard Volume Decomposition 3. What is the size of my opportunity? Shopper & Dollar Distribution Trip & Conversion Opportunity Assessment 4. Who is the shopper and who is winning with my shopper? What is my shopper looking for? Shopper Shifting Shopper Trends Walmart Shopper Cross-Purchase Scorecard 5. On what trip types do shoppers buy my category? Trip Distribution 6. Is my price competitive? Key Item Report Lowest Price in Market Report 7. Do I have the right assortment? Competitor-specific Assortment Key Item Reports New Item Trends

Global Customer Insights & Analytics 3 Frozen Pizza Product Hierarchy Frozen Pizza TTL US: $4.1 B (4.5%)* TTL WMT: $1.0 B (5.3%)* Single Serve Pizza TTL US: $640.4MM (6.5%)* 15.7%** TTL WMT: $111.8 MM (11.1%)* 11.0%** SS Value TTL US: $159.7MM (5.6%)* 3.9%** TTL WMT: $6.8MM 23.8%* 0.7%** SS Mainstream TTL US: $296.9MM (3.9%)* 7.3%** TTL WMT: $68.3MM (8.3%)* 6.7%** SS Premium TTL US: $124.7MM (3.9%)* 3.1%** TTL WMT: $29.9MM (7.3%)* 2.9%** SS Unconventional TTL US: $59.1 (23.3%)* 1.4%** TTL WMT: $6.8MM (50.0%)* 0.7%** Multi Serve Pizza TTL US: $3.4B (4.2%)* 84.1%** TTL WMT: $902.1 MM (4.5%)* 89.0%** MS Value TTL US: $362.2 (2.6%)* 8.9%** TTL WMT: $157.8MM (4.2%)* 15.6%** MS Mainstream TTL US: $1.2B (4.8%)* 28.7%** TTL WMT: $304.0MM (4.3%)* 30.0%** MS Premium TTL US: $1.4B (3.9%)* 34.6%** TTL WMT: $333.7 MM (2.8%)* 32.9%** MS Unconventional TTL US: $338.5MM (1.6%)* 8.3%** TTL WMT: $59.0MM (1.3%)* 5.8%** MS Combo TTL US: $145.6MM (12.1%)* 3.6%** TTL WMT: $47.6MM (20.0%)* 4.7%** Pizza Crust TTL US: $11.0MM 23.9%*.3%** TTL WMT: $29.5K %* 0.0%** Pizza Crust TTL US: $11.0MM 23.9%*.3%** TTL WMT: $29.5K %* 0.0%** Source: Nielsen Scan Data – 52 weeks ending 12/08/12 vs.YAG * $ % chg. vs. YAG ** $ Contribution to Frozen Pizza * $ % chg. vs. YAG ** $ Contribution to Frozen Pizza Segment size and hierarchy Frozen Pizza is declining everywhere but it is more severe at Walmart Walmart underperforms vs. the market in Multi- serve Value and Combo segments and all Single Serve segments

Global Customer Insights & Analytics 4 Retail pizza sales did well moving into the recession; they, are losing to foodservice pizza as the economy recovers Retail Pizza including: Frozen pizza Refrigerated pizza Crust/dough, kits Shelf-stable pizza crust mixes, kits, sauce Take-and-bake-pizza Restaurant Pizza Sales Projections Price competitively with brands or segments that compete most directly with take-out? Dominos $4.99!

Global Customer Insights & Analytics 5 Frozen Pizza Sales Have Declined in Walmart and the Remaining Market Over the Last Two Years Frozen Pizza Sales Trends Week ending dates

Global Customer Insights & Analytics 6 Total Walmart by $ per Buyer Purchase Frequency & Annual Spend of Frozen Categories Total US by $ per Buyer Pizza is purchased about as frequently as snacks and less often than Meals This may imply that shoppers think of Pizza less as a meal alternative and more as a snack or it could be due to Pizzas and Snacks being on a separate aisle Trips X Annual Spend

Know the shopper Who buys the category? On what trip missions do my shoppers purchase the category? What consumer trends affect the category

Global Customer Insights & Analytics 8 Older People Eat Less Pizza than Younger Consumers, But Shoppers age 55 + Represents a Large Proportion of Sales 53% of respondents 65+ and 62% of those age 55 to 64 indicate that their household Frozen Pizza compared to about 70% of younger households Mintel BASE: TOTAL SAMPLE 2,000; AGE – 260; – 358; – 370; – 386; – 292; 65+ – 334 Pizza type by age

Global Customer Insights & Analytics 9 Walmart Frozen Pizza Declines are Driven by Market Contraction, Retained Buyers Buying Less, Shifting is Minimal Publix, Kroger, Dollar Channel, Sam’s and Save A Lot are gaining sales from Walmart Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012 Walmart Banner – Total U.S. – Frozen Pizza Dollar Shifting Walmart Banner Dollar trends are due to:Dollar Gains & Losses (000 Net Dollars Interact Index -3, , , , , ,96693 Shopper Shifting

Global Customer Insights & Analytics 10 Walmart is Losing Pizza Stock Up Trips Which Account For 82.5% Of All Frozen Pizza Trips ; Kroger is gaining all trip types NOTE: Competitors have been ordered in terms of Trip share Trip share is computed for Walmart Supercenters  Stock Up Trips  Immediate Needs Trips  Kroger  Publix  WMT Supercenters Change in Walmart’s Trip Share in the US 2012 Vs – Frozen Pizza +0.4% -0.4% +1.2% +0.3% +1.8% Source: Walmart POS Data, IRI Trip Data : Period : Last Year (Nov Nov 2011) This Year (Nov Nov 2012) Top 2 Banners by Trip Share gain apart from Walmart  Department Destination Trips +1.1% Confidential: Internal to Walmart only -0.3% WM Total US  Kroger +1.8%  Kroger  Publix +0.6% Trip Type Distribution

Global Customer Insights & Analytics 11 Walmart Is Losing Frozen Pizza Trips Across All Trip Types Walmart’s share of Pizza trips exceeds 19% but it is declining (.3%) Walmart’s total box trips are increasing at 0.4% suggesting an issue with Pizza, not the box 83.6% of Pizza is purchased on stock-up trips; both sales and visits declined 7.5% Immediate Needs (What’s for Dinner Tonight) are10.8% of sales but they are declining. Walmart’s share of Seasonal/Party trips is 28.7%; only 1.7% of Pizza is sold on these trips Trip Type Distribution

Global Customer Insights & Analytics Fz Pizza $/Trip % of All Trips w/ Fz Pizza Top 10 Affinity Products in Fz Pizza basket in Walmart Total ranked by Total Opportunity Dollars* Trip Index In Walmart Total, FZ Handheld Entrees and Fz/Rfg Processed Chicken are the top 2 of the top 10 affinity products in Fz Pizza baskets; representing over a 4 million dollar opportunity each if Fz Pizza increased by 1% in each of their baskets $7.74 $6.90 $6.85 $7.17 $6.08 $8.61 $6.63 $6.01 $6.88 $7.36 *Dollar Opportunity if get Fz Pizza into an additional 1% of Row Product baskets % of Row Product Trips w/ Fz Pizza SIG Syndicated Reviews ILD ConsumerNetwork Household data; Current 52 Weeks Ending ; 52wk static; Walmart Total

Global Customer Insights & Analytics 13 Finding Fz Pizza Walmart trips are more likely than average to include  Fz Handheld Entrees (Non-Breakfast)  Processed Fz/Rfg Chicken/Chicken Sub  Fz Appetizers/Snack Rolls  Dry Dinner Mixes With Meat  Fz Ravioli  Fz Onion Rings  Fz Pretzels  Fz Breaded Vegetables  Fz Tortellini/Tortelloni  Fz Cookie Dough Co-Promotio n Ideation Recommendations Offerings in the above categories to this consumer group should address the need gap/need state around quick meal solutions and stock-up needs; offering options that deliver on convenience needs for a busy household. Focus on convenient, yet satisfying or flavorful attributes of the offerings and various ways the products can be used to satisfy meal and snack cravings. Appeal to the desire for quick, easy meals. Focus on convenience as ways to meet their needs. Convey the promotions as a quick, easy way to incorporate convenient products into their hectic schedule. Summary of Recommendations – Fz Pizza in Walmart Total Convenient Meal Solutions/Snacks & Stock up Items

Global Customer Insights & Analytics 14 Income: Frozen Pizza Buyer & Dollar Distribution by Retailer/Channel Pizza Buyers are Distributed Across Demo Groups: Walmart Wins with Lower Income Pizza Buyers as do Dollar and Save A Lot Stores Buyer & Dollar Distribution Breaks with fewer than 50 raw buyers in the Channel/Retailer are excluded Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012

Global Customer Insights & Analytics 15 Age: Frozen Pizza Buyer & Dollar Distribution by Retailer/Channel 26% of US Pizza Consumers are Over Age 55, They Account for only 20% of Pizza Dollars Buyer & Dollar Distribution Breaks with fewer than 50 raw buyers in the Channel/Retailer are excluded Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012

Know the competition Have shoppers shifted purchases to other retailers? How do I compare (benchmark) against others?

Global Customer Insights & Analytics 17 All Category Buyers: Volume Driver by Key Competitors Most Retailers Convert More of their Pizza Shoppers than Walmart Increasing shopper conversion by 10 points is a $165 MM opportunity 1 extra trip from our shoppers is a $159 MM opportunity Opportunity Calculations: Conversion = (25MM Walmart buyers / 36.9% conversion) * 10% * $24.39 = $165 million Trip = (1 trips / buyer) * $6.37 per trip * 25MM Walmart shoppers = $159 million Shopper Scorecard Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012

Tactics - pricing Is my pricing competitive?

Global Customer Insights & Analytics 19 Source: Nielsen syndicated POS and Walmart POS data for 104 weeks ending 11/16/2012 WMTROM 2898bps WMT -77bps ROM -207bps -1597bps Price Position, Cause and Effect Increased Promotion Contributed to Lower Market Price Implying Vendor Negotiation Opportunity

Global Customer Insights & Analytics 20 But Deal Does Not Drive Incremental Sales – Implies Need for Competitive EDLP Pricing and Vendor Negotiations Source: Nielsen Scan Data – 52 weeks ending 12/08/12 Base & Incremental Sales Brands whose Price Position Worsened Totinos 56 th percentile to 48th Totinos Party Pizza55 th percentile to 51st Red Barron75 th percentile to 48th Tony’s90 th percentile to 83rd California Pizza Kitchen85 th percentile to 77th 39% on deal 20.7% wasted

Global Customer Insights & Analytics 21 Price Position Rest of Market Walmart Brand Price (First Week) Price (Last Week) Price Chg (Bps) Price (First Week) Price (Last Week) Price Chg (Bps) Avg. Unit Vol on Deal TY Chg in Unit Vol on Deal Price Pos (First Week) Price Pos (Last Week) Chg in Price Pos TY All Brands $4.09$ $4.61$ %15% Totino’s Party Pizza $1.32 0$1.40$ %27% Di Giorno $4.53$ $5.02$ %10% Red Baron $3.63$3.6555$4.33$ %19% Tombstone $4.09$ $4.48$ %13% Tony’s $2.50$ $3.12$ %24% Celeste Pizza for One $1.11$ $1.10$ %-4% Jack’s Original $2.98$ $3.06$ %-1% Freschetta $5.55$ $6.32$ %21% California Pizza Kitchen $4.55$4.5866$5.19$ %12% Totinos $1.43$ $1.56$ %35% Great Value / Private Label $4.26$ $4.49$ %3% Source: Nielsen syndicated POS and Walmart POS data for 52 weeks ending 11/16/2012 Our Price Position Declined Overall and with Totino’s, Red Baron, Tony’s and California Kitchen; Some of our Highest Volume Brands Price Position by Brand